The Denver real estate market is off to a white hot start in 2022. Home inventory is still historically low and interest rates have been moving up, creating an environment where buyer competition is as fierce as we’ve ever seen on the best listings.
In a lot of these competitive situations we’re seeing the buyer’s financing plans play a large role in deciding on which offer to accept.
So what can buyers do regarding their financing to put themselves in the best position possible to win a bidding war? We have 3 tips for you based on what we’re seeing in the market.
Tip #1: Be a cash buyer (or partner with a company that can make you one!)
When multiple offers are submitted on a property the “all cash” offers typically rise to the top. We completely understand that most buyers are not going to have enough cash to make an all cash offer, but that doesn’t have to stop you from being a cash buyer.
Wait, what? How can I be a cash buyer if I don’t have the cash?
There is a Denver-based company you may not have heard of called “Accept.inc” that specializes in just that… leveling the playing field by turning financed buyers into all cash buyers.
Here is the gist of how it works:
Accept.inc is a lender and they prequalify you for a mortgage. Once they approve you they will then wait for you to find your dream home with your real estate agent. (Psst… we’d love to be that agent… you can learn more about how we help buyers here) They will then purchase the property all cash for you at the price and terms you choose to offer. You then buy it from them at the same price shortly after that using the mortgage they prequalified you for originally. It’s a really amazing tool to put in your tool belt as a buyer and it can help separate your offers from the crowd. By acting as a cash buyer you can make offers that can close on the sellers timeline, no appraisal clause, no loan “out”. (All very appealing to sellers… hence your chances of selling go way up!)
So far our clients have done a handful of transactions with Accept.inc as a team. We’ve dealt with them from the buyer side for our clients and we’ve sold homes to buyers that are using Accept. We’re new to working with Accept and we’ll see how it goes, but based on what we’ve seen so far it’s worth exploring if you’re a buyer trying to give yourself every chance to win in competitive situations.
Sounds great, but how much does it cost? There are no additional fees for their cash program, they just make money on the loan origination fees like typical mortgage lenders. As a buyer you should always compare a few and make sure you feel good about the one you choose. Even if Accept.inc turns out to be a little higher than other lenders, that would make sense to me as they’re providing the cash buyer service in addition to the mortgage.
Quick disclosure here. We are not affiliated with Accept.inc in any way, nor do we receive any financial benefit from anyone using financing that Accept.inc offers. We just think it’s a great tool and we’re encouraging our buyers to apply and see if it’s something that could work for them. As with all lender decisions, buyers should do their due diligence, ask lots of questions and make sure they are comfortable with the terms.
To learn more check out this Buyer Information Packet, learn more on the Accept.inc website or apply for their Cash-Approved Buyer program.
Tip #2: Use a “bridge loan” so you can buy your next home before you sell your current one.
We suspect one reason home inventory is so low is because many homeowners that want to make a move are afraid to do so because they fear they’ll sell their home in a weekend then they won’t be able to find their next home. That is a valid concern in this market!
One way to mitigate this risk is to consider using a “bridge loan” that will allow you to buy your next home using the equity in your current home before you sell it.
Here is the quick explanation of how this would work:
You would secure a “bridge loan” against your current home which would be behind your first mortgage on that home. This bridge loan would provide you with the down payment needed to go make offers on your next home. Once you find that next home and get it under contract you’d then list your current home, sell it and pay off your current home’s mortgage and the bridge loan.
This plan lets people tap into the equity sitting in their current home without having to sell it until they find their next home. Stress level… reduced! You no longer have to worry about selling your current home fast and not being able to find the next one… because you’ll buy the next one first.
A few things to consider here:
First, with this plan you have to be able to financially qualify to carry both homes at once. By that I mean your income has to be enough to support making both payments, because even though you know it’s a short period of time that you’ll own both homes the lender has to treat it like you’re going to own them both going forward. So not everyone will qualify for this plan.
Second, I’d suggest you sell the current home as quickly as possible after you contract to buy the new one. This will keep your costs down because you won’t carry both homes for any longer than you need to. It also seems prudent because markets can change, and the longer you have both homes the longer you bear the risk of the market going down which could cause problems on the sale of your current home.
We think this bridge loan solution could help a lot of people that want to move but are fearful.
Do you qualify? The first step is to talk with a lender that has a bridge loan program and find out! One of our go to lenders, Central Park resident Peyton Fullerton with Fairways Mortgage, has a bridge loan program and you can see some of the basics here. If you’re interested in applying you should reach out to Peyton and her team at (303) 884-7924 or [email protected].
Full disclosure, we don’t receive any financial benefit from referring clients to Peyton and her team. We do, however, have a marketing agreement in place with Fairway Mortgage that provides us with marketing funds.
Tip #3: Get your loan fully approved other than the appraisal
Often times there are bidding wars without cash offers in the mix. Or sometimes the cash offers think their cash is so valuable they don’t write up the strongest offer overall. In these cases, the next best thing is an offer with financing that is already fully approved other than the appraisal.
What do we mean by a loan that is fully approved other than the appraisal? Most of the time buyers just get a loan “prequalification”, which usually means they submitted some income and asset documents, had their credit checked and the lender ran some initial calculations that shows they likely could get a loan. This is a good start, but it’s even better if a buyer fully applies for the loan and takes it through underwriting, getting a loan approval that’s complete other than the appraisal. (Which obviously comes later once the buyer finds the home they want to buy.)
Why do we suggest you do this? The main reason is it shows the seller that you’re serious and that your loan is less likely to fall through because it’s already approved except the appraisal. In multiple offer situations this financial strength could make the difference between you and the other offers! You’re going to have to do all the work of getting this approval anyway later, why not do it now and lower your stress while strengthening your offer. (Everyone should be looking for ways to write stronger offers without just focusing on a higher price!)
If you do want to do this check in with your lender early in the process to see if this is something they offer. If they don’t, we’d suggest you shop around for lenders that do offer it. We can suggest some local lenders we like working with if you’d like recommendations.
So there you have it, 3 tips to help you win a bidding war in this hyper competitive Denver real estate market.
If you’d like help from a real estate team focused on Central Park we’d love to help! We think the local neighborhood expertise, which includes being in the deal flow of the area, knowing the local agents, knowing the homes inside and out, etc., is all more valuable now than ever since it’s so hard to be a buyer these days.
My contact info is below the post below to get started. Not ready to start but want to learn more about Central Park? This is what we do! Here are a few of our social media channels you might find valuable:
Central Park Scoop Facebook – tons of updates on the community, real estate, local businesses, parenting and more.
Central Park Scoop Instagram – posts and stories about our listings and what we learn as we’re out and about in the community.
Central Park Scoop Youtube – videos specifically geared for people that are new to the community. Topics include real estate, schools, new build homes & more.
